Perley v. Glastonbury Bank & Trust Co.
| Decision Date | 27 April 1976 |
| Citation | 368 A.2d 149,170 Conn. 691 |
| Court | Connecticut Supreme Court |
| Parties | , 92 A.L.R.3d 259, 19 UCC Rep.Serv. 188 Richmond PERLEY et al. v. The GLASTONBURY BANK AND TRUST COMPANY et al. Richmond PERLEY et al. v. Robert M. BURNEY. |
Frank DeNezzo, Hartford, for appellant (named defendant and third-party plaintiff, the Glastonbury Bank and Trust Company).
Martin A. Gould, Hartford, for appellant (third-party defendant the Connecticut Bank and Trust Company).
David C. Wichman, Manchester, for appellees (plaintiffs).
Before LOISELLE, BOGDANSKI, LONGO, BARBER and MacDONALD, JJ.
Two defendant banks have appealed a judgment for the plaintiff drawers in an action to recover from the Glastonbury Bank and Trust Company, hereinafter the drawee bank, the amount of a check drawn by the plaintiffs payable to two payees and paid by the drawee bank on a forged endorsement of one of the payees. The drawee bank impleaded as third-party defendant the payor bank, the Connecticut Bank and Trust Company.
The facts will emerge in greater detail in our discussion of the trial court's findings and conclusions, but, briefly summarized, involved a transaction between the plaintiffs Richmond and Alice E. Perley, husband and wife, and Geraldine C. Burney, a well-known real estate agent in Glastonbury, who was a neighbor and acquaintance of the Perleys. Prior to May, 1970, the Perleys had loaned Geraldine Burney $8,800 to invest in land, which debt had subsequently been repaid. In May, 1970, Geraldine Burney proposed another transaction with the Perleys, this time a loan for money to buy, together with her husband, Robert M. Burney, some land in East Glastonbury. The Perleys agreed and on May 25, 1970, Geraldine Burney came to the Perley home with a note for $22,000 bearing the signatures of Robert M. Burney and Geraldine C. Burney. Richmond Perley was not at home and Alice Perley, at Geraldine Burney's direction, made out a check for $22,000, payable to Robert M. and Geraldine C. Burney. It subsequently developed that the signature of Robert M. Burney on the note was unauthorized and forged. Alice Perley delivered the check to Geraldine Burney believing that the Burneys were going to combine the proceeds with some of their own funds. Geraldine Burney deposited the check duly endorsed by her and also bearing an endorsement by Robert M. Burney which subsequently proved to be unauthorized and forged, with the Connecticut Bank and Trust Company, hereinafter the payor bank, which did not at that time make any attempt to verify the endorsements but credited the check as a deposit in Geraldine Burney's account. The check was processed through the Hartford clearing house stamped 'Prior Endorsements Garanteed' and was thereafter presented to the drawee bank, which debited the Perley's account in the amount of $22,000.
Geraldine Burney died shortly before the note came due, and the Perleys brought suit against Robert Burney and cited in as an additional defendant the administrator of the estate of Geraldine Burney. When the Perleys learned that Robert Burney had claimed that his signatures on both the note and check were forgeries, they notified the drawee bank and then instituted this action against that bank to recover the amount of the check. The two cases were consolidated by order of the court and tried together.
The defendant banks raised two principal defenses, claiming (1) that the Perleys did not intend Robert Burney to have any interest in the check and (2) that the Perleys were negligent in making no effort themselves to verify the signature of Robert Burney on the note. They also claimed initially that notice to the drawee bank did not satisfy the requirements of § 42a-4-406(4) of the General Statutes, but since that claim was not briefed it is considered as having been abandoned. State v. Beauton, 170 Conn. 234, 236-37, 365 A.2d 1105.
The state referee, acting as the court, rejected the banks' defenses, concluding that the Perleys intended both Robert and Geraldine Burney to have an interest in their check for $22,000 and that they had not been negligent. As a result, the court ruled that the unauthorized endorsement of Robert Burney was invalid and rendered the check ineffective for transfer. In their assignment of errors, the defendants have appealed the court's rejection of their defenses, claiming that its conclusions were not supported by the findings, and that it failed to include in the finding undisputed facts material to the case, which would support their claims that the Perleys were negligent and that they considered Robert Burney only a nominal payee. 1
The parties are not in dispute over the basic law applicable to this case. At issue, rather, is whether the trial court's conclusions as to intent and negligence are consistent with the facts found. As a result, the scope of our review is limited. The trial court's conclusions are tested by the finding, and '(a) conclusion must stand unless it is legally or logically inconsistent with the facts found or unless it involves the application of some erroneous rule of law.' Hutensky v. Avon, 163 Conn. 433, 437, 311 A.2d 92, 95.
Considering first the claim that the Perleys did not intend Robert Burney to have any interest in the check, we observe, at the outset, that it was made out by Alice Perley to 'Robert M. and Geraldine C. Burney,' in the order in which their names appeared on the promissory note, and that '(a)n instrument payable to the order of two or more persons . . . if not in the alternative is payable to all of them and may be negotiated, discharged or enforced only by all of them.' (Emphasis added.) Section 42a-3-116(b) of the General Statutes (§ 3-116(b) of the Uniform Commercial Code). The check required the valid endorsement of both of the payees to be negotiated or deposited properly. Under § 42a-4-401(1), a bank may charge against a customer's account only items that are 'properly payable.'
The defendant banks have sought to overcome the effects of the forgery by invoking the nominal payee rule of § 42a-3-405(1)(b), which declares that a drawer is not harmed if the drawee bank's action of a check carries out the drawer's purpose. 2 The purpose of this rule is to place the risk of loss from a wrongful endorsement on the drawer when his intended payee in fact received the proceeds of the check and when no unintended person has taken an interest in the check as a consequence of the forged endorsement. Gordon v. State Street Bank & Trust Co., 361 Mass. 258, 260, 280 N.E.2d 152. They claim that it is clear from the facts found that the Perleys intended Robert Burney to have no actual interest in the check, that the funds reached the person for whom they were alone intended, namely, Geraldine Burney, and that the plaintiffs, therefore, suffered no loss by reason of the forged endorsement. In support of this claim, they point to the Perleys' prior financial transactions with Geraldine Burney individually, Robert Burney's line of work separate from his wife's real estate business, and Alice Perley's testimony that she would have made the check out to anyone Geraldine Burney had requested. The court concluded, however, that the Perleys intended that the check be endorsed by both Robert M. and Geraldine C. Burney and that both should receive the proceeds of the check. Those conclusions were based upon the following subordinate findings of fact, no one of which was attacked by the defendants: that Geraldine Burney originally spoke to Alice Perley of the investment as a joint venture of both Geraldine and Robert Burney together to buy land in East Glastonbury; that the note Geraldine Burney presented to Alice Perley bore the signatures of both Robert M. and Geraldine C. Burney; that Geraldine Burney directed Alice Perley to make the check out to Geraldine C. and Robert M. Burney; and that Alice Perley delivered the check to Geraldine Burney believing that the Burneys were going to combine the proceeds of the check with some of their own funds.
State National Bank v. Dick, 164 Conn. 523, 531, 325 A.2d 235, 239. The defendants have failed to show that the trial court's conclusion was so inconsistent with the undisputed findings of fact as to be in error. If the Perleys believed that the Burneys were going to combine the proceeds of the check with some of their own funds, then it is entirely consistent that it was the Perleys' intent that both Geraldine and Robert Burney have an interest in the check, 3 and we find that the record adequately supports the court's conclusion to that effect.
The second principal defense advanced by the defendants was that the Perleys by reason of their negligence, were estopped from placing liability on the defendant banks for the loss resulting to them from the forged check. Section 42a-3-406 of the General Statutes (§ 3-406 of the Uniform Commercial Code) provides: 'Any person who by his negligence substantially contributes to a material alteration of the instrument or to the making of an unauthorized signature is precluded from asserting the alteration or lack of authority against a holder in due course or against a drawee or other payor who pays the instrument in good faith and in accordance with the reasonable commercial standards of the drawee's or payor's business.' This states an exception to the general rule that when a loss is produced by the forged endorsement of a check, the burden falls upon the party who takes the check from the forger. See note, 'Allocation of Losses from Check Forgeries under the Law of Negotiable Instruments and the Uniform Commercial Code,' 62 Yale L.J. 417, 421, 462; National Bank & Trust Co. of Central Pennsylvania v. Commonwealth, 9 Pa. Cmwlth. 358, 305 A.2d 769, 771. ...
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